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On June 20, 2011, the U.S. Supreme Court decided Wal-Mart Stores, Inc. v. Dukes, a class action case which Wal-Mart Stores, Inc. (Wal-Mart) fought for 10 years against approximately 1.5 million past and present female employees nationwide (the “Class”). The Class alleged that Wal-Mart’s female employees received less pay and fewer promotions than their male counterparts. The trouble for the Class, however, was in sufficiently identifying a common, unlawful cause for the pay and promotion disparities.

Wal-Mart maintains an anti-discrimination policy and does not expressly limit the pay and promotion opportunities of its female employees. Absent evidence of overt sex discrimination, the Class was required to search for an unlawful cause of the alleged “disparate impact” on their pay and promotion opportunities. Unlike most disparate impact claims, however, the Class did not contend that Wal-Mart utilized a uniform testing procedure or job qualification that caused pay or promotion disparities. Instead, the Class alleged that Wal-Mart’s organizational structure itself constituted a uniform “pattern or practice” which unlawfully caused pay and promotion disparities throughout its 3,400 domestic locations.

Like many large employers, Wal-Mart utilizes a decentralized method of decision-making which affords local store supervisors great discretion in making promotion decisions and determining pay – within specified ranges set by upper management. The Class contended that such widespread discretion, in conjunction with the assertion that gender stereotypes exist in many social settings, created a “corporate culture” of workplace discrimination based on sex. This theory, however, did not convince the Supreme Court that the Class was entitled to litigate so many individual claims in a single lawsuit.

Under federal law, it is generally understood that courts will not certify a class and allow litigation to proceed as a class action unless – among other things – the class and their claims include the “requisite numerosity, commonality, typicality and adequacy of representation.” In a 5-4 decision, the Wal-Mart Court reversed two lower federal courts and held that the Class was improperly certified under federal law because the claims lacked sufficient commonality. Here, the Class sought “to sue about literally millions of employment decisions at once,” with relevant employment decisions spread among thousands of supervisors in stores throughout the United States. With so many different employment decisions bearing upon whether each individual class member actually faced discrimination, the Class was unable to present sufficiently common questions of law or fact. The Court further observed that Wal-Mart’s decentralized decision-making process is “a very common and presumptively reasonable way of doing business” and one that “should itself raise no inference of discriminatory conduct.”

The Wal-Mart case is a big loss for the plaintiff’s class action bar. The takeaway for employers is that a decentralized decision-making process across various business locations may actually reduce the threat of employee class actions. Nevertheless, decentralizing employment decisions may, in some business circumstances, result in policies which are not uniformly applied – leading to other, related discrimination claims. Given these realities, employers should carefully weigh the benefits and burdens associated with both centralizing and decentralizing employment decisions. Such risks and rewards vary with each employer’s particular business model.

To discuss the impact of the Wal-Mart ruling on your business, as well as other ways to protect against claims from employees, please contact Ben Lewis at (502) 587-3645 or any member of Greenebaum’s Labor and Employment Practice Group.

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About Greenebaum Doll & McDonald PLLCGreenebaum Doll & McDonald PLLC is a widely-respected business law firm with approximately 150 professionals in five offices, serving local, national and international clients in virtually every industry.

Ben Lewis is the Co-Chair of the Fiduciary Litigation Practice Group. He focuses his practice on complex business litigation matters, particularly disputes involving breach of fiduciary duty claims against trustees ...